Insiders And Institutions Are Buying FreightCar America, Inc.
Insider buying in FreightCar America, Inc (NASDAQ: RAIL) marked a bottom in share prices late last year and now the institutions are helping to drive share prices higher. Insider activity has been non-existent since the last round of buying in November and December of 2020 but it was all bullish back then. Insiders like CEO James Meyer and Director Bienevedes Jesus Salvador Gil bought 50,500 shares bringing total insider holdings to over 15.5% of the company. This is in addition to another 55% held by institutions and that percentage is growing.
Institutions have been actively buying shares over the past year with only a very slight amount of selling to counter it. Among the largest purchasers and holders of the stock are Morgan Stanley and Wells Fargo which hold about 2.0% of the company between them. The analysts working for these institutions, however, have been silent in terms of ratings, outlook, and price targets. The last activity was way back in the middle of 2020 and that was merely a reiterated Hold from Cowen. In our view, based on the results and pressing need for supply-chain infrastructure, we see that trend changing soon and for the better.
FrieghtCar America Rises On Mixed Results
FreightCar America had a mixed quarter but that is versus an analysts consensus estimate that has seen no significant activity in over a year. Compared to last year, the $58.31 million in revenue is up 131 but, more importantly, revenue is up 43% and we see sequential and long-term gains continuing for the next few quarters. The question is how badly supply chain disruptions will impact the business and they are impacting the business.
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“While industry demand fundamentals remain strong, the pace of recovery is being gated by certain external factors starting with raw material cost inflation. Sales inquiries, however, continue to be very healthy and support our footprint expansion announced earlier this year,” says CEO Meyer.
Moving down to the earnings, the company posted the 4th consecutive quarter of positive gross margins and the 2nd consecutive quarter of positive operating margins. The $0.03 in GAAP earnings beat the consensus by $0.03 and should improve further in the coming quarters. Management restated their guidance for the delivery of 1,750 to 1,850 cars this fiscal year and the backlog is still robust. The bad news is that backlogs are falling on a sequential basis and might be an indication peak demand is behind us.
The Shorts Are Getting Railed By FreightCar America
The short sellers weren’t piling into FreightCar America as they have in some of the meme stocks but the short interest was notably high at 7% going into the report. That alone is enough to account for the 5.0% increase in share prices post-earnings release but we think there is more to the story. Demand for railcars should remain strong for the next several years at least while global supply chains are being shored up and expanded.
The Technical Outlook: FreightCar America Is Pulling Out Of The Station
Price action in FreightCar America has been bottoming over the past year in tandem with insider and institutional buying and it looks like a full reversal is in play. The Q3 release sparked a 5.0% surge in prices that now has the action confirming support at the 150-day moving average and on track to set a new two-year high fairly soon. In our view, this stock will likely move up to the $8 level before hitting serious resistance. A break above that level would set a new two-year high and confirm a continuation of the reversal that could take price action up to the $12 to $14 level.
Companies in This Article:
|Company||Current Price||Price Change||Dividend Yield||P/E Ratio||Consensus Rating||Consensus Price Target|
|FreightCar America (RAIL)||$3.84||-1.3%||N/A||-0.65||N/A||N/A|